Policing, Labor Market, and Crime in Japan: Evidence from Prefectural Panel Data

The study analyzed long-term changes in Japanese crime rates and their relationship with policing and labor market conditions, focusing on the increase in crime rates around 2000. The study used yearly prefectural panel data from 1978 to 2018 and estimated econometric models to explore the factors related to the crime rate. Fixed effects models were used to control for unobservable heterogeneity across prefectures. We addressed the endogeneity problem in the number of police officers with the instrumental variable approach, employing the number of traffic fatalities and the number of firefighters as instruments. Instrumental variable estimation revealed that increasing the number of police officers reduced the crime rate. We also confirmed that crime decreased when the labor market was tight and that increasing minimum wages reduced crime. The model’s variables largely explain crime rate declines since 2002 but do not account for increased crime up to 2002. Policing and labor market conditions do matter in crime rates. In Japan, the number of local police officers increased against the explosion of crime around 2000. Such policing significantly reduced crime after 2002. At the same time, increasing job opportunities and income from legal work also contributed to the decline. In contrast, crime expansion until 2002 was not attributed to the model’s variables, so we need further research.